Narrative
Full Description
Project narrative
In November 2006, China Eximbank and the Government of Ethiopia’s Ministry of Finance and Economic Development signed a $500 million buyer’s credit facility agreement (互惠贷款) — also known as a master loan framework agreement and a master facility agreement — for an unspecified set of development projects. All subsidiary loans approved under the buyer’s credit facility agreement (captured via Record ID#45047) carried the following borrowing terms: a 13-year maturity, a 4-year grace period, and an interest rate of LIBOR plus a 2-3% margin. All of the subsidiary loans were secured with (i.e., collateralized against) Ethiopia's export receipts to China, which at the time primarily consisted of sesame seed export receipts. The buyer’s credit facility agreement also required that all Ethiopian exports (export receipts) to China to be overseen by the Commercial Bank of Ethiopia (CBE), the country’s largest state-owned financial institution. As a source of collateral, the borrower was required to maintain a minimum cash balance in a debt service reserve account (DSRA) at the CBE. The cash balance of the DSRA (escrow account) was $284,368,041 as of June 30, 2011, $308,914,767 as of June 30, 2012, $300,000,000 as of June 30, 2016, $300,000,000 as of June 30, 2017, $300,000,000 (ETB 8,260,410,000) as of June 30, 2018, $300,000,000 as of June 30, 2019, ETB 10,599,600,000 as of June 30, 2020, ETB 8,058,726,059 as of June 30, 2021, ETB 10,722,750,953 as of June 30, 2022, and ETB 9,832,603,839 as of June 30, 2023. 16 subsidiary loans for 16 different projects were reportedly approved under the buyer’s credit facility agreement. China Eximbank, CBE, and Ethiopian Electric Power Corporation (EEPCo) signed a subsidiary buyer’s credit loan worth ETB 354,476,531 ($36,452,980.74) for the Lot 2 Bahir Dar-Debre Markos-Addis Ababa 400kV Power Transmission Project on September 23, 2008. The loan's first and last scheduled principal payment dates were March 31, 2012 and September 30, 2021, respectively. Its first and last scheduled interest payment dates were July 1, 2009 and September 30, 2022, respectively. The borrower was expected to use the proceeds of the loan to finance approximately 85% of the cost of an ETB 410,544,213.50 commercial contract between the Ethiopian Electric Power Corporation (EEPCo) — an Ethiopian state-owned enterprise — and China CAMC Engineering Co. Ltd. (CAMCE), which was signed in August 2007. According to the Government of Ethiopia’s AMP, the ETB 354,476,531 loan achieved a 62% disbursement rate, with China Eximbank making 6 loan disbursements (worth ETB 218,318,792) between 2010 and 2012: an ETB 11,081,561 disbursement on March 31, 2010, an ETB 17,955,612 disbursement on July 7, 2011, an ETB 2,680,069 disbursement on October 10, 2011, an ETB 89,359,689 disbursement on January 8, 2012, an ETB 63,176,117 disbursement on October 10, 2011, and an ETB 34,065,744 disbursement on January 8, 2012. The purpose of the project was to construct a 400 kV, 193.77 km power transmission line that connects Bahir Dar II substation to Debre Markos substation. Its precise implementation start date is unknown. However, as of September 2010, the project had achieved a 75% completion rate. The project was officially completed and inaugurated on March 19, 2011. It was originally scheduled to commence on June 13, 2008 and reach completion on December 13, 2009. There are some indications that the China Eximbank loan for the Lot 2 Bahir Dar-Debre Markos-Addis Ababa 400kV Power Transmission Project financially underperformed vis-à-vis the original expectations of the lender. According to the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS), the borrower secured a 4-year maturity extension, with the loan's final maturity date reset to June 30, 2026.
Staff comments
1. This project is also known as the Debremarikos-Addis Ababa Lot-2 Project and the Debre Markos-Bahir Dar II Transmission Line Construction Project. The Chinese project title is 埃塞俄比亚400kV变电站和输电线路项目. 2. AidData has estimated the loan's all-in interest rate (5.83685%) -- at the time that it was issued -- by adding 2.5% (the midpoint between a 2% and 3% margin) to average 6-month LIBOR in September 2008 (3.33685%). 3. This buyer's credit loan from China Eximbank is not included in the database of Chinese loan commitments that SAIS-CARI released in 2020 and re-released in 2021. Nor is it included it in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 4. This project was part of a larger, $168 million project with four sections (‘Lots’) — known as the Bahir Dar-Debre Markos-Addis Ababa (BBDA) Power Transmission Line and Substations Project, the BBDA Power Transmission Line and Substation Project, the BBDA Power Transmission and Transformation Project, or the Tana Beles to Addis Ababa 400 kV Power Transmission Line Construction Project — that involved the construction of a 400 km transmission line from the Tana Beles hydropower plant to Sululta substation through Bahir Dar and Debre Markos substations. The power transmission line has three sections: a 67 km section from Tana Beles hydropower plant switchyard to Bahir Dar II substation, a 193.77 km section from Bahir Dar II substation to Debre Markos substation, and a 215.43 km section from Debre Markos substation to Sululta substation. 5. The AMP system identification number for the Lot 2 Bahir Dar-Debre Markos-Addis Ababa 400kV Power Transmission Project is 8714327100835. 6. 1 Ethiopian Birr (ETB) was equal to 0.11 United States Dollars (USD) in June 2008, which implies that the ETB 354,476,531 loan commitment recorded in the AMP was worth USD 38,992,418.41 at that time that it was contracted. However, AidData relies on the USD face value of the loan reported by MOFED through the following source: https://www.sciedupress.com/journal/index.php/jms/article/viewFile/25488/16079. 7. There is some evidence in the AMP that suggests this project may have been partially grant-financed. This issue warrants further investigation. 8. According to CBE's financial statements for the year ending on June 30, 2012 (https://www.combanketh.et/cbeapi/uploads/2011_12_2037357399.pdf), 'CBE is the administrator of the total loan of USD 499,222,780, granted by EXIM Bank of China to the Ethiopian Electric Power Corporation (EEPCO) and Muger Cement Enterprise (MCE). The said loans are repayable by EEPCO and MCE to CBE in Birr over a period of ten years.' 9. The loan identification number in the Government of Ethiopia’s Debt Management and Financial Analysis System (DMFAS) is 20776003 and the corresponding project name in DMFAS is ‘BAHIRDAR-DBERMARKOS LOT2’. See https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0 10. As of September 2024, the Government of Ethiopia recorded the loan's all-in interest rate as 5.5% in DMFAS (see https://www.dropbox.com/scl/fi/7nrczfanixvivmiyzqx3i/MOFED-Loan-Level-Data-on-Borrowing-Terms-and-Loan-Performance-September-2024_OTHER_PUBLIC.xlsx?rlkey=5sqhh9ii4t3x8cmz0jf6s7cod&dl=0), which suggests that debt rescheduling agreement for the Lot 2 Bahir Dar-Debre Markos-Addis Ababa 400kV Power Transmission Project may have also involved an interest rate reduction. This issue warrants further investigation. 11. More research is needed to identify the precise date on which the China Eximbank debt rescheduling agreement was signed. One source suggests that it may have come shortly after April 9, 2019 (see https://repub.eur.nl/pub/134509/final-thesis-valeria-lauria-nov-2020.pdf).